Apple Has More Game-Changing Tech in the Works, Says CEO Tim Cook

Last year, Apple CEO Tim Cook spent a lot of time answering questions about how Apple would be different from what it was under Steve Jobs, and just how he would continue Jobs’s incredible legacy.

Cook’s appearance at D10 served as a chance for the executive to introduce himself and share his vision for where Apple was headed in terms of products as well as its plans to continue to be a good corporate citizen committed to the human rights of its workers and, if possible, to build some of its products in the U.S.

And, of course, one thing hasn’t changed. Tech watchers still hang on Cook’s every word, and scrounge for any tidbits that might indicate just what phone, computer, TV or watch might be coming next from Cupertino.

6:14 pm: Time to sit back and enjoy the show, Narisetti said. Or, for Sheryl Sandberg, lean in and enjoy the show.

Enter Walt and Kara, wearing D sunglasses. No marching band this year.

Walt jokes that Yahoo has just bought AllThingsD parent News Corp.

“That’s not a good thing for me,” Kara said.

Walt shows the revamped AllThingsD logo in Yahoo purple.

6:16 pm: Okay. Enough pleasantries. Tim Cook comes onstage.

6:17 pm: First question is from Walt. Samsung is gaining in phones. Various governments are asking questions. The stock is down a bunch. There’s a sense that you may have lost your cool.

Kara: Or we can start with taxes.

Walt: Is Apple in trouble?

Tim Cook: Absolutely not.

“We are a product company so we think about products,” Cook said, noting that the company sold 85 million iPhones last quarter; iPad, 42 million. More important, customers love them.

Customer satisfaction numbers are off the chart, and the usage numbers, based on Web traffic, far outpace its market share.

6:20 pm: I look at that and say, I feel pretty good.

6:20 pm: Cook: From my point of view, over my long tenure at Apple, not as CEO, we’ve always had competent rivals. We fought against Microsoft — still fight against Microsoft, particularly in the PC space.

We fought against hardware companies thought to be really tough, like Dell.

We’ve always suited up and fought.

Apple has always had competition to focus on, but our North Star is always on making the best products. We always come back to that. We want to do the best phone, the best tablet, the best PC. I think we’re doing that.

6:22 pm: If you look at the stock, which is a lot of what people focus on, the stock price has been frustrating. It’s been frustrating for investors and for all of us. This, too, is not unprecedented.

The beauty of being around for a while is you see a lot of cycles. At the end of 2007, Apple’s stock price was $200. It was $75 a couple years later.

What we have to do is focus on products — making the best products, and if we do that right … then the other things will happen.

6:24 pm: Walt: Apple is a company capable of changing the game. It has been a while.

Cook: We’re still the company that is going to do that. We have some incredible plans that we have been working on for a while.

The culture is all still there, and many of the people are still there. We have several more game changers in us.

Kara: Let’s go through them. You talked last year about television.

Cook: We’re still playing in TV through Apple TV. For several years we were selling a few hundred thousand. We’ve now sold 13 million — about half of those in the last year.

It’s been good for customers, but also for learning for Apple. Customers would agree there are things about television that aren’t so great.

We answered some of those — clearly not all of those through Apple TV.

6:28 pm: Kara: Some people in Hollywood are feeling more confident against Apple.

Walt: Are they holding up your TV project?

Cook: I don’t want to go into detail, as you might have guessed. But it continues to be an area of great interest.

He’s going on about how Apple TV is providing a lot more feedback than when Apple sold fewer of them, but he’s dodging the question of when/if Apple might go beyond its current approach.

He does keep reiterating that TV is outdated.

It’s not an experience that has been brought up to this decade, Cook said.

I don’t want to go any further on this because I don’t want to give anybody any ideas. There is a very grand vision.

Walt tries to summarize, and perhaps get Cook to say more. No dice.

Cook: It’s an area of incredible interest.

Walt: Is it so interesting that you will have a product this year?

6:31 pm: On to wearables.

As for Google Glass, it’s probably not likely to be a mass-market item, Cook said. “It’s probably more likely to appeal to certain markets,” Cook said.

But wearables as a broader market, Cook said, could be a profoundly interesting area of technology.

Cook notes that he wears a Nike FuelBand.

“I think Nike did a great job with this.”

Most of the good ones on the market do only one thing. The ones that do more than one thing don’t do anything particularly well.

“There’s lots of things to solve in this space,” he said, adding it is an area that is “ripe for exploration.”

Lots of companies will be doing things in this space.

Walt: Will Apple be one of them?

Cook: I don’t want to answer that one.

6:35 pm: Walt and Kara are trying to get Cook to pick an area of the body most ripe for wearables.

He’s down on glasses.

I’m interested in a great product. I wear glasses because I have to. I can’t see without them. “I don’t know a lot of people that wear them that don’t have to.”

“The wrist is interesting,” Cook said, noting that it is more natural. “You still have to convince people it is worth wearing.” Most young people don’t wear a watch or anything else.

It’s not just about the wrist, Cook said.

“The whole sensor field is going to explode,” he said. “It’s a little all over the place right now. With the arc of time, it will become clearer.”

6:38 pm: Walt: We are going to ask about taxes. But first, Android.

Android has clearly gained in an area that Apple innovated in, Walt said.

Cook: “Do I look at it? Of course. I don’t have my head stuck in the sand.”

Winning at Apple, though, isn’t about making the most. Arguably, we make the best PC. We don’t make the most.

They do make the most music players and tablets, but not the most phones, he said.

Cook rattles off more usage stats showing that usage of Apple products outpaces even Apple’s large market share. “What the numbers suggest over and over again is that people are using our products more. That’s what we are all about. We want to enrich people’s lives.”

Globally, there are a lot of phones that are labeled as smartphones but are used more like feature phones, Cook said.

Some tablets are being bought and not used because the experience is not great.

Cook said his iPad now handles a significant amount of his computing work.

“It’s changed the game. I don’t hear that from people that have Android tablets.”

6:43 pm: Now more customer service stats and awards.

It’s about enriching lives, not making the most, he said.

(Of course, investors probably like it when Apple makes the most and the best.)

Cook: Do I worry about the demographics? No. Our customers are all ages, and I love that. We try to appeal to everyone.

As for what’s coming and what’s next, Cook, as expected, is not saying much.

He does say that Apple will be rolling out the future of iOS and OS X at its WWDC in June.

6:46 pm: Kara: Talk to us about the new iOS.

Cook: “I think I will wait and let you see it,” Cook said. He brings up the wait-for-Christmas analogy.

Kara said she never waits to open her presents, and Walt points out he is Jewish.

Kara: So is this a big update to iOS?

Cook: I think I will let you be the judge. Jony Ive has been key to this, Cook does say. He also notes that there needs to be a blend of hardware, software and services. Having Ive do software and hardware rather than just hardware is part of this, even if Apple always married those.

“What this did is just amp it up,” Cook said.

6:48 pm: Kara asking about Scott Forstall’s exit. What happened there? Was he not collaborative?

Cook: I don’t want to talk about anybody in particular. The whole concept was to tighten the groups even more, so we could spend more time finding the magic at the intersections. “I think it has been an incredibly great change.”

Craig (Federighi) is doing both iOS and Mac software. Eddy Cue is doing all services.

6:50 pm: Kara asks Tim Cook about his leadership style. I would say I am a bossy pain in the ass. How would you describe yourself?

Cook: I’ll leave that to others.

Kara: How are you different from Steve Jobs?

Cook says he is different in a ton of ways, “but the most important things are the same.”

6:52 pm: Walt, on product strategy. With the iPod, Apple had a range of products, each designed to hit different markets and use cases. In one case, Apple killed off its best-selling iPod mini and introduced the nano. You haven’t done that with the iPhone.

Why not do what Apple did with the iPod, and have a range of new products each year?

Cook: We haven’t so far. That doesn’t shut off the future.

As to why not so far, “It takes a lot of really detailed work to do a phone right.”

Cook said doing so might take off focus. The iPod, Cook said, evolved over time. But, take the iPod shuffle, it had really different features and played a different role. When we brought out iPod mini, people thought it wouldn’t sell because it had less storage. But it proved the market was there for lighter, thinner and smaller.

My only point is these products all served a different person, a different type. On the phone, that is the question. Are we now at a point to serve enough people that we need to do that?

6:56 pm: Walt: Let me help you. There seem to be people that like much larger screens. There are people that like “phablets” that are between phones and tablets.

Cook: A large screen today comes with a lot of trade-offs. People do look at the size. They also look at things like do the photos show the proper color. Battery life, brightness, etc.

What our customers want is for us to weigh those and come out with a decision. At this point, we’ve felt the Retina display that we are shipping is overwhelmingly the best.

6:58 pm: Kara: Let’s move to taxes. So, what happened at Congress?

Cook: Here’s how I felt on this. The subcommittee was coming to certain conclusions, and we felt strongly that we looked at those very differently. I thought it was very important to go tell our story and to view that as an opportunity instead of a pain in the ass.

He said he wanted to be a catalyst for a discussion. We came in with a proposal, he said, arguing for Apple’s call for revenue-neutral but major overhaul of corporate taxes. “This is what we think should be done.”

Simplicity is good. “It’s how we approach everything.”

Apple’s tax return is two feet high, he said.

“I would suggest we gut it.”

7:01 pm: We don’t use tax gimmicks, Cook said.

But you take advantage of the system, Kara said.

Walt: To the average person, these look like gimmicks.

Cook: It’s a Band-Aid-and-paper-clip kind of thing. Over the years, Congress has kept Band-Aiding it.

At the urging of corporate lobbyists, Walt notes.

Probably true, Cook said.

He also notes that Apple pays $6 billion in U.S. taxes — more than anyone else. He suggests a plan that might even have Apple pay a bit more. But in exchange, it could repatriate all that cash it has offshore.

7:03 pm: So why all this Ireland stuff?

Cook: We have no special deal with the Irish government.

I believe, based on the hearing that, simplistically, the thing that’s being debated is for a company like Apple or any other company that sells things across the world and develops them in the United States, some people believe that all of the profits all around the world should accrue to the U.S. and be taxed here.

The IRS has no problem with a system that allows profits for money overseas to be taxed in other jurisdictions.

Cook notes that if everything developed here was taxed here, it might encourage a shift in development overseas.

“I’m worried,” Cook said. Cook said he wants to make sure everyone has thought through the next logical steps.

As for the lovefest Apple enjoyed, Cook said it didn’t necessarily feel that way to him while sitting in the witness chair. “It was great to be part of the process,” he said, adding he hopes it will aid the reform process.

Walt asks about increased oversight and attention on Apple and its business practices.

Cook: When you get a little larger, you get more attention. It comes with the territory.

As for the environment, Cook notes that the company owns the largest solar farm and largest fuel cells of any non-energy company.

Former EPA administrator Lisa Jackson is joining Apple. “She’s going to be coordinating a lot of this activity across the company.”

Walt: You don’t feel you are a target of governments?

Cook: When you are large, if somebody is looking at something, you are going to be caught up in some way.

Cook said he doesn’t even mind being held to a higher standard.

“We all hold ourselves to high standards,” Cook said.

As for the e-book case, Cook said that Apple rejected a settlement because it was asked to sign a document that it did something wrong. Cook said he doesn’t think Apple did anything wrong in that case.

“We’re not going to sign something that says we did something that we didn’t do, so we’re going to fight.”

7:13 pm: Kara: As for Apple’s piles and piles of money. Why doesn’t Apple buy things with its money?

Cook: We do acquire. The previous year, we were probably on a pace of acquiring a company every 60-75 days. Maybe six a year.

Apple already acquired nine companies this fiscal year.

Walt: Did you announce those?

Cook: Of course not. Only the ones we have to. Some of them were announced.

We’re always looking. If anything, we will do more of that in the future.

Walt: Big acquisitions?

Cook: We’re not actively looking at any, but I wouldn’t rule it out. We’re not opposed to that if it makes sense.

7:15 pm: What about an acquisition of social? Kara asks.

Cook says iMessage and Game Center are social products that Apple does. Plus it has “elegant” integration with Facebook and Twitter.

“I’ve never felt we had to own a social network.” We have looked at large acquisitions. It’s not something we are afraid of.

7:17 pm: Walt on whether Apple might allow others to make changes to the home screen or keyboard. On Android, third parties can give you a choice. Have you given any thought to a little less control?

Cook: As for opening up more programming hooks, “I think you will see us open up more in the future,” he said. “But not to the degree that we put the customer at risk of having a bad experience.”

We think the customer pays us to make certain choices on our behalf. Some want full control, but not the masses.

“But will we open up more,” Cook said. “Yes.”

Kara: Would you allow the Facebook bobbleheads?

Cook: Right now we’re focused on the integration between Facebook and iOS.

“That doesn’t mean that’s an end point. There’s always more the companies can do. I’m not sure that’s one.”

7:20 pm: On to Q&A.

How important is the mobile advertising business for Apple?

Cook: We got into mobile advertising to help developers make money.

“That was our sole motivation. It wasn’t about Apple making money. It’s still important.”

Apple developers tend to make more money than Android ones, he said.

To the degree we can contribute by doing things in advertising, I’m very interested. But if Apple ever decided it couldn’t do that, it would be less interesting.

7:22 pm: Next question. Should Apple be addressing more than the Apple market with iCloud?

Cook aims to take it up a level, and tries to talk more generically about whether Apple would port one of its own apps to Android.

“We have no religious issue with doing that. If we thought it made sense to do that, we would do it.”

It doesn’t make sense today to move iCloud, Cook said.

7:23 pm: What about concerns about the overuse of technology, especially when it comes to children? When is the right time to buy a kid their first iPhone?

Cook: “I’ve seen kids do incredible things with an iPhone and an iPad from a learning point of view. Parenting is key. I like kids very young learning and having a very curated experience by their parent.”

You have to monitor time, etc.

7:25 pm: What kind of services may be coming from Apple to convince people to buy their next phone from Apple?

Cook points, of course, to existing services such as iMessage and iTunes and FaceTime.

“However, we are making tons of investments in services,” he said. “I don’t want to announce something today, but it is an area that we are very focused on.”

Kara: Did you make a bid for Waze?

Cook: We did not.

7:27 pm: Clearly, the crowd is not happy with Cook not offering more of a crystal ball.

Why not give a glimpse of the future as Apple sees it? an audience member asks.

Cook: We release products when they are ready. We believe very much in the element of surprise. We think customers love surprises. I have no plan on changing that.

Next up, a question on maps.

Mapping is complex, Cook said. “We have an enormous investment going on maps,” he said, noting many improvements in the last several months. “We think location is very important.”

7:29 pm: Walt: Is Apple Maps fixed to your satisfaction?

“We screwed up,” Cook said. It’s greatly improved, but not there yet. We have more to do.

7:30 pm: Does Apple need to own content like Amazon, Netflix, etc., do with exclusive deals?

“I’ve never felt like we needed to own content. We need to have access to great content.”

“We don’t have the skill to produce and direct.”

The other half of the question is whether customers need to own or rent their content.

iTunes is still growing, but there are some other services that are also growing (cough Spotify cough).

You have customers that want both (rental and purchase).

Walt: Are you going to give them both?

Cook: That I won’t answer.

7:33 pm: Question on patents. What is the end game for the Apple-Samsung spat?

One benefit of the battle — not just for Apple, but for the industry — is that companies haven’t been able to use standards-essential patents to get injunctions on other products.

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